Calculating Fair Market Value If Your Vehicle Is Totaled

, ,

The aftermath of a car accident can be annoying, confusion, and stressful. In the event of a collision resulting in vehicle damage or complete loss, individuals often find themselves in urgent need of a substitute vehicle for essential tasks such as commuting to work, transporting children to school, and purchasing groceries for the family. In Texas, the “fair market value” serves as the legal benchmark for assessing property damage when a vehicle is deemed a total loss.

What is “fair market value”?

Fair market value is essentially the price that both a seller and a buyer, who are willing participants, would mutually agree upon for a vehicle in the same condition it was in prior to the accident. However, it is important to note that in reality, the fair market value is often lower than what commercial sources, like online information, might indicate. Additionally, the value assigned to a “totaled” vehicle is frequently less than the cost of purchasing a reasonably comparable replacement vehicle.

On occasion, individuals may incorporate unique features or personalize their vehicle through custom alterations. It is advisable to retain receipts for any additions such as new tires, upgraded sound systems, or other enhancements made to the vehicle. However, it is common for individuals to feel let down when these additional items do not significantly contribute to the assessment of property damage in the event of an accident.

Although these items may contribute to a slight increase in property value, it is important to note that the market may not assign the same level of value to them. While custom improvements can certainly bring joy to their owners, it is common for the actual fair market value of these enhancements to be lower than the additional insurance coverage purchased by some individuals for their custom vehicle items.

How is it determined that a car is “totaled”?

The term “totaled” might give the impression of a severe accident when referring to a vehicle, but it simply indicates that the expenses required for repairs surpass the vehicle’s fair market value. For instance, if a car worth $2,500 sustains damage in a collision and the repair costs amount to $3,000, the car would be deemed a total loss or “totaled.”

If a car valued at $25,000 sustains the same amount of damage in an accident and the repair cost is estimated at $3000, the car would not be considered totaled. However, in the event of a totaled car, the law assumes that the owner can immediately purchase a replacement vehicle, without any provision for the at-fault party or their auto insurance company to cover the cost of a rental car until the replacement is obtained. On the other hand, if the car is not totaled, there will be a period of time when it is being repaired, and the owner should be entitled to fair compensation for the loss of use during that time, typically in the form of the reasonable cost of a rental car.

Will my vehicle be worth less after a wreck?

When a car undergoes repairs, although its exterior may appear as good as it was before, its value typically decreases compared to its pre-accident worth. The market enforces a penalty on vehicles that have been involved in collisions and subsequently repaired, known as “diminution in value.” According to legal theory, this penalty should be acknowledged and compensated. For instance, if a car initially valued at $25,000 sustains damage and requires $3,000 worth of repairs, its post-repair value might only amount to $23,000, indicating a diminished worth. While insurance companies may not provide compensation for the diminution in value following a crash, it is an essential aspect of a property damage claim that should not be disregarded.

Why it’s smart to have an attorney deal with the insurance company.

The resolution of most vehicle property damage claims occurs through negotiations between the vehicle owner and the opposing insurance company. In the event of a total loss, both parties reach an agreement on the compensation amount, and the vehicle owner transfers the title to the insurance company. The adverse insurance company then ensures that any outstanding liens, such as a car loan, are settled, and the remaining balance is given to the owner. If the car can be repaired for a cost lower than its pre-accident fair market value, the adverse insurance company is responsible for covering the reasonable repair expenses, along with additional compensation for the duration the car is unavailable due to repairs. However, if the accident was not caused by someone else’s fault, the negotiation process typically takes place between the vehicle owner and their own auto insurer (provided they have coverage for such losses). It is important to note that in this scenario, the insurance company’s payment will be reduced by the deductible amount.

A knowledgeable personal injury attorney can help you understand your property damage insurance coverage. It is possible that individuals may be unaware of having insufficient coverage, which could leave them without any means to pay for their vehicle or repairs in the event of an accident. Additionally, some individuals may have property damage coverage, but their policy limits may not be sufficient considering the value of their vehicle.


Named one of the “Best Car Accident Lawyers in Dallas” by, Brian Brunson is Dallas personal injury attorney who is dedicated to helping clients who have suffered a car, truck, or motorcycle injury through the negligent or wrongful conduct of other drivers. In addition, his professionalism is unmatched and the firms’ client reviews speak for themselves.

We proudly serve the Dallas-Fort Worth metroplex and surrounding areas, our office supports the legal needs of a wide variety of clients. Let the Law Office of Brian Brunson be your advocate in your time of need and help you put your life back together. If we can’t win or settle your case, you don’t pay a dime! We know it can be daunting to take that first step after you’ve been hurt. Contact Brian Brunson today via email or call us toll-free at 1-844-41-WRECK. We can help, when no one else will.